Below we provide relative strength charts for ten S&P 500 sectors. Each chart shows the sector’s performance over the last year relative to the S&P 500. When the line is rising, it means the sector is outperforming the S&P 500. When the line is falling, it means the sector is underperforming the S&P 500. The dots on each chart represent FOMC rate decision days. Blue dots are FOMC days where the Fed held rates the same. Red dots are FOMC days where the Fed hiked rates.
A few things worth noting:
Two defensive sectors — Consumer Staples and Utilities — have begun to outperform again after underperforming for most of the past twelve months. Health Care also appears to have put in a bottom and has really done well versus the broad market lately. Energy looks the opposite of Health Care. It outperformed for most of 2016 up until the Fed hiked rates in December, and since then it has been straight down.
The relative strength chart for Technology is telling as well. In the initial weeks after the election, Tech underperformed some of the more “Trump-friendly” sectors. But since early December, Tech has been on a tear. It’s really the only cyclical sector that hasn’t skipped a beat over the last four months.
Finally, Financials and Industrials both experienced significant outperformance in the first six weeks after Trump was elected last November. But the Industrials sector has given up nearly all of its post-Election outperformance at this point, while Financials has performed only inline with the market since the Fed hiked rates last December. The most recent rate hike in early March sparked another round of selling in the Financials. Ironically, it was the prospect of higher interest rates that sparked Financial stocks higher, but the days that the FOMC actually hiked rates in both December and March resulted in near-term tops for the sector. The Fed commentary that came along with the most recent FOMC hike was interpreted as more dovish than expected, and since then Financials have traded lower.